ARTICLE
18 December 2024

High Court rules unfairly sacked worker entitled to damages for psychiatric injury

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Avant Law

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Avant Law is a doctor-focused law firm that was originally established for our members in 2009 to provide the highest level of defence and protection in medical indemnity. It is now the largest medico-legal firm in Australia and continues to protect members for medical indemnity and employment issues and provide expert advice to help reduce the risk of a complaint or claim. With our deep understanding of medical practitioners and their practices and to help support doctors across life’s opportunities and challenges, we provide tailored legal services to address their personal, professional and business legal needs. Avant Law is a subsidiary of Avant Mutual (Avant) – Australia’s leading doctor organisation with a proud heritage of protecting the Australian medical professional for 130 years.
Recent HC decision highlights the evolving nature of employment law in Australia.
Australia Employment and HR

In a groundbreaking decision, the High Court of Australia has ordered Vision Australia to pay a former employee $1.4 million in damages for psychiatric injury arising after he was subjected to a "sham" internal disciplinary process and dismissed from his employment.

Key lessons

  • Employers have a responsibility towards their employees' mental health and wellbeing and must consider the psychological impact of unfair and unreasonable workplace actions, especially in connection with disciplinary and termination processes.
  • Assumptions are dangerous and a valid reason for disciplinary action based on established facts is always key. It is crucial to follow proper and defensible investigative and disciplinary procedures to establish the relevant facts, and to give the employee a fair opportunity to respond, before making a decision about disciplinary action up to and including dismissal.
  • Take expert employment law advice when investigating employee issues and proposing disciplinary action, especially in cases where termination of employment is proposed.

In March 2015, after eight years' employment, the employee was involved in an incident with a hotel manager during a work trip. A complaint was made, the employee was stood down and invited to a meeting to discuss the complaint. The employer decided to accept the hotel manager's account of the alleged incident over the employee's response, and further took into account previous allegations of aggressive behaviour by the employee that were not put to him at the meeting, in deciding to terminate the employment.

Following the dismissal, the employee was diagnosed with major depressive disorder. In 2020, he commenced proceedings for damages for psychiatric injury, which he won.

Historically, the general legal position has been that psychiatric injury caused by a breach of the employment contract could not be compensated. The High Court has now held that psychiatric injury caused by a breach of contract can be compensated.

In this case, the employer breached the employment contract by botching its own disciplinary procedures and not telling the employee of key allegations the employer ultimately considered in deciding to terminate the employment and so failed to give the employee an opportunity to respond to those undisclosed allegations or any real opportunity to respond to the allegations that were raised with him.

Critically, the High Court observed that a person's employment is usually one of the most important things in his or her life – that it gives not only a livelihood but an occupation, an identify and a sense of self-esteem, whereby an unfair process of termination for alleged misconduct could affect all three of those interests. In the circumstances, it was reasonable to expect that the employee would have been so distressed by the manner in which the employer breached the employment contract and by the consequences of that breach, including his dismissal for the alleged misconduct. In the circumstances, there was a serious possibility that the employee would suffer a serious psychiatric injury.

The High Court's decision highlights the evolving nature of employment law in Australia, the increasing recognition of workers' mental and emotional wellbeing and the duty of care of an employer towards its employees.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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